BP, Shell team up to explore N.S. offshore

BP PLC's CEO Bob Dudley speaks at the company’s headquarters in London on Feb. 1, 2011. BP has successfully bid $1.04 billion for exploration rights off Nova Scotia. The company was fined billions of dollars and two employees charged with manslaughter this week in connection with the 2010 the Deepwater Horizon disaster that killed 11 offshore workers in the Gulf of Mexico. (AP)

UPDATED 7:36 p.m. Friday

A pair of oil industry giants plan to spend $1.08 billion exploring Nova Scotia’s offshore in the coming years, including one that just agreed to pay a record settlement over the oil spill in the Gulf of Mexico.

BP has successfully bid $1.04 billion for exploration rights on four parcels, the Canada-Nova Scotia Offshore Petroleum Board announced Friday. Shell has claimed another four leases by agreeing to ante up $31.8 million, the industry regulator said.

The total bid amount is a new record for the offshore industry in the Atlantic region, the petroleum board said. BP’s $638-million offer for one parcel is also a new regional record for a single lease.

Neither company would reveal their exploration plans Friday. But both said they’re pleased to have landed the blocks.

“We view this an important acreage addition to our existing holdings in offshore Nova Scotia,” said Stephen Doolan, a Calgary-based spokesman for Shell.

The leases awarded Friday brings to eight the number of parcels that Shell has acquired in Nova Scotia this year.

The Dutch-based supermajor agreed in January to ante up $970 million for four other blocks. The company plans to begin seismic testing on those parcels by mid-2013 or early 2014, with exploratory drilling possible in 2015.

BP called the Nova Scotia blocks are a key new play.

“This award gives us access to a significant piece of geology, one of the most promising new deepwater areas to be licensed in recent years,” Mike Daley, executive vice-president of exploration, said in a news release.

The British petroleum company has not previously been involved in drilling off the coast of Nova Scotia.

Shell has hunted for oil and gas off and on since the 1960s and owns a stake in the Sable Offshore Energy Project.

The leases awarded Friday include six deepwater parcels, roughly 250 kilometres south-southwest of Halifax. The other two are further east, in shallow water near Sable Island.

BP Exploration Operating Co. Ltd., has secured four of the deepwater blocks, located on the central and southwestern Scotian Slope.

Meanwhile, Shell Canada Ltd. grabbed the other two deepwater leases on the southwestern part of the Scotian Slope. Both are adjacent to the blocks that Shell acquired 10 months ago.

The Calgary-based company also secured the shallow-water leases, which are in the Sable sub-basin and close to Sable and Encana Corp.’s Deep Panuke gas project, which has yet to begin production.

The announcement came a day after BP agreed to plead guilty to a number of criminal charges and pay a record $4.5 billion in a settlement with government over the 2010 disaster.

Premier Darrell Dexter said the company will have to adhere to strict regulations in its work off Nova Scotia.

“What I know is that the regulatory regime that is in place is one of the strongest in the world,” he said.

“I know that much has been learned after what happened in the Gulf (of Mexico), and the demands that we put on companies is to ensure that they operate in a safe, responsible high-quality manner.”

Dexter said he expects the $2 billion Shell and BP have committed to spend will translate into millions for provincial coffers and create new jobs.

He didn’t have specific projections, but said in the past, 30 to 40 per cent of the committed spending has come directly into the provincial economy.

Dexter said the bids were an endorsement of the province’s geoscience work on the offshore, giving companies a better idea of the potential it holds.

Offshore industry officials agreed the sector is gaining momentum.

“We’re ecstatic, to say the least,” said Brian Lane, vice-president and CEO of I.H. Mathers, a Halifax-based marine services provider.

“With both Shell and BP in the game, there’s a real critical mass for going forward.”

Chris Pitts, director of business development with marine services firm Secunda Canada LP, said it takes years to hunt for oil and gas.

“If they should find something and develop it, it’s decades and decades of work. That’s a good thing.”

Barbara Pike, executive director of the Maritimes Energy Association, said the companies will likely be looking for oil in deep water. But natural gas development might be economic in shallow water if Shell gets good results there, she said.

Not everyone in Nova Scotia was happy to hear that more offshore exploration is in the works.

Mark Butler of the Ecology Action Centre said deepwater drilling is risky.

“When you’re drilling at those depths, as we saw in the Gulf (of Mexico), things can go wrong. And if they go wrong, it’s really difficult to plug it.”

Gretchen Fitzgerald, the Sierra Club of Canada’s Atlantic director, said the offshore regulatory regime needs strengthened.

“The (petroleum) boards are in the business of getting (the) offshore going,” she said. “They’re also supposed to be in charge of safety and protecting the environment. That’s untenable.”

She mentioned the explosion and fire that ripped through a Gulf of Mexico oil platform Friday as workers used a cutting torch, sending 11 to hospital with burns and leaving two missing in waters off Louisiana.

The exploration licences must still be approved by the federal and provincial governments.

Federal Natural Resources Minister Joe Oliver, who must endorse the leases, said Canada has one of the strongest offshore regulatory systems in the world.

“Our government supports the safe and responsible development of our natural resources,” Oliver said in a joint news release with Defence Minister Peter MacKay.